- AUD/USD remains heavy during the week, extending its losses by almost 1.80%.
- Sentiment remains negative due to high US inflation reports, further cementing aggressive Fed tightening.
- AUD/USD Price Analysis: Tilted to the downside; unless buyers reclaim 0.6800, the further downside pressure remains.
The AUD/USD trims two consecutive days of gains and slides during the North American session, on dismal market sentiment, following a report that prices paid by producers continued high, following suit the path of consumer inflation, further cementing the case for further aggressive tightening by the Fed.
The AUD/USD is trading at 0.6732 after recovering from an early trip towards daily lows at 0.6681 on broad US dollar strength, though it recovered some ground once the dust settled, stabilizing at current price levels.
AUD/USD falls on USD strength, despite upbeat Australia job report
Early in the New York session, the US Department of Labour reported that the Producer Price Index heightened above the 11% threshold on a year-over-year reading. Although it was a negative report, it shows that producers are getting a respite as commodity prices recoil on concerns about global demand. Following Wednesday’s CPI, that report might open the door for a larger than expected 75 bps rate hike by the Fed, as Eurodollars July money market futures contract shows 271.50 bps of tightening.
All that weighed on the AUD/USD, which tumbled towards 0.6680s in the release. At the same time, US Initial Jobless Claims, for the week ending on July 9, rose by 244K, though was mainly ignored by investors, which are focused on inflation.
In the meantime, during the Asian session, the AUD/USD got bolstered by a better-than-expected employment report, which showed that the unemployment rate dropped to its lowest level in 50 years. In the meantime, expectations of a Reserve Bank of Australia (RBA) 50 bps rate hike are fully priced in. Although the AUD/USD climbed on the release, the appetite for US dollar safety weighed on the major.
What to watch
The Australian economic calendar will feature New Home Sales for June on Friday. The economic docket is packed on the US front, led by Retail Sales, the University of Michigan (UoM) Consumer Sentiment, and further Fed speaking, ahead of entering the blackout period.
AUD/USD Price Analysis: Technical outlook
The Aussie dollar remains tilted to the downside, though remains capped by the July 12 daily low at 0.6710, which in case of being broken again in the day, sellers would step, paving the way for further losses. Additionally to that, oscillators remain favoring shorts, further cementing the case. Therefore, the AUD/USD first support would be 0.6700. Break below will expose the YTD Low at 0.6681, followed by May 2020 lows at 0.6616.